Definition of Cash Flow Forecast

Cash Flow Forecast

An estimate of the timing and amount of a company's inflows and outflows of money measured over a specific period of time typically monthly for one to two years then annually for an additional one to three years.

Related Terms:

cash flow provided by operating
activities adjusted to provide a more recurring, sustainable measure. Adjustments to reported cash
provided by operating activities are made to remove such nonrecurring cash items as: the operating
component of discontinued operations, income taxes on items classified as investing or financing activities, income tax benefits from nonqualified employee stock options, the cash effects of purchases and sales of trading securities for nonfinancial firms, capitalized expenditures, and other nonrecurring cash inflows and outflows.

The value of assets that can be converted into cash immediately, as reported by a company. Usually
includes bank accounts and marketable securities, such as government bonds and Banker's Acceptances. cash
equivalents on balance sheets include securities (e.g., notes) that mature within 90 days.

Amounts held in currency and coin (commonly referred to as petty cash) and amounts on deposit in financial institutions.cash disbursement journal
A journal used to record the transactions that result in a credit to cash.

Currency, coin, and funds on deposit that are available for immediate withdrawal without
restriction. Money orders, certified checks, cashier's checks, personal checks, and bank drafts
are also considered cash.

The value of assets that can be converted into cash immediately, as reported by a
company. Usually includes bank accounts and marketable securities, such as government bonds and Banker's
Acceptances. cash equivalents on balance sheets include securities (e.g., notes) that mature within 90 days.

A relatively recent term that refers to how fast a business
is using up its available cash, especially when its cash flow from operating
activities is negative instead of positive. This term most often refers
to a business struggling through its start-up or early phases that has not
yet generated enough cash inflow from sales to cover its cash outflow for
expenses (and perhaps never will).

Cash cow

A company that pays out all earnings per share to stockholders as dividends. Or, a company or
division of a company that generates a steady and significant amount of free cash flow.

cash cow

Business that produces a lot of cash but few growth prospects.

Cash cycle

In general, the time between cash disbursement and cash collection. In net working capital
management, it can be thought of as the operating cycle less the accounts payable payment period.

Cash Cycle

The length of time between a purchase of materials and collection of accounts receivable generated by the sale of the products made from the materials.

Cash deficiency agreement

An agreement to invest cash in a project to the extent required to cover any cash
deficiency the project may experience.

Cash delivery

The provision of some futures contracts that requires not delivery of underlying assets but
settlement according to the cash value of the asset.

Cash discount

An incentive offered to purchasers of a firm's product for payment within a specified time
period, such as ten days.

Cash dividend

A dividend paid in cash to a company's shareholders. The amount is normally based on
profitability and is taxable as income. A cash distribution may include capital gains and return of capital in
addition to the dividend.

cash dividend

Payment of cash by the firm to its shareholders.

Cash equivalent

A short-term security that is sufficiently liquid that it may be considered the financial
equivalent of cash.

Cash-equivalent items

Temporary investments of currently excess cash in short-term, high-quality
investment media such as treasury bills and Banker's Acceptances.

Cash Equivalents

Highly liquid, fixed-income investments with original maturities of three months or less.

Cash Equivalents

Instruments or investments of such high liquidity and safety that they are virtually equal to cash.

Cash flow

In investments, it represents earnings before depreciation , amortization and non-cash charges.
Sometimes called cash earnings. cash flow from operations (called funds from operations ) by real estate and
other investment trusts is important because it indicates the ability to pay dividends.

cash flow

An obvious but at the same time elusive term that refers to cash
inflows and outflows during a period. But the specific sources and uses
of cash flows are not clear in this general term. The statement of cashflows, which is one of the three primary financial statements of a business,
classifies cash flows into three types: those from operating activities
(sales and expenses, or profit-making operations), those from
investing activities, and those from financing activities. Sometimes the
term cash flow is used as shorthand for cash flow from profit (i.e., cashflow from operating activities).

cash flow

the receipt or disbursement of cash; when related
to capital budgeting, cash flows arise from the purchase,
operation, and disposition of a capital asset

Cash flow

cash received and paid over time.

Cash Flow

In investments, NET INCOME plus DEPRECIATION and other noncash charges. In this sense, it is synonymous with cash EARNINGS. Investors focus on cash flow from operations because of their concern with a firm's ability to pay dividends.

Cash flow after interest and taxes

Net income plus depreciation.

Cash-flow break-even point

The point below which the firm will need either to obtain additional financing
or to liquidate some of its assets to meet its fixed costs.

Cash flow coverage ratio

The number of times that financial obligations (for interest, principal payments,
preferred stock dividends, and rental payments) are covered by earnings before interest, taxes, rental
payments, and depreciation.

cash flow from operating activities, or cash flow from profit

This equals the cash inflow from sales during the period minus the cash
outflow for expenses during the period. Keep in mind that to measure
net income, generally accepted accounting principles require the use of
accrual-basis accounting. Starting with the amount of accrual-basis net
income, adjustments are made for changes in accounts receivable,
inventories, prepaid expenses, and operating liabilities—and depreciation
expense is added back (as well as any other noncash outlay
expense)—to arrive at cash flow from profit, which is formally labeledcash flow from operating activities in the externally reported statement
of cash flows.

Cash flow from operations

A firm's net cash inflow resulting directly from its regular operations
(disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing
securities), calculated as the sum of net income plus non-cash expenses that were deducted in calculating net
income.

Cash flow matching

Also called dedicating a portfolio, this is an alternative to multiperiod immunization in
which the manager matches the maturity of each element in the liability stream, working backward from the
last liability to assure all required cash flows.

Cash flow per common share

cash flow from operations minus preferred stock dividends, divided by the
number of common shares outstanding.

Cash Flow Provided by Operating Activities

With some exceptions, the cash effects of transactions
that enter into the determination of net income, such as cash receipts from sales of goods
and services and cash payments to suppliers and employees for acquisitions of inventory and
expenses.

Cash Flow Provided or Used from Financing Activities

cash receipts and payments involving
liability and stockholders' equity items, including obtaining cash from creditors and repaying
the amounts borrowed and obtaining capital from owners and providing them with a return on,
and a return of, their investments.

Cash Flow Provided or Used from Investing Activities

cash receipts and payments involving
long-term assets, including making and collecting loans and acquiring and disposing of
investments and productive long-lived assets.

CASH-FLOW STATEMENT

A statement that shows where a company’s cash came from and where it went for a period of time, such as a year.

Cash Flow statement

A financial report that shows the movement in cash for a business during an accounting period.

Cash flow time-line

Line depicting the operating activities and cash flows for a firm over a particular period.

Cash Flow–to–Income Ratio (CFI)

CASH FLOWS FROM FINANCING ACTIVITIES

A section on the cash-flow statement that shows how much cash a company raised by selling stocks or bonds this year and how much was paid out for cash dividends and other finance-related obligations.

CASH FLOWS FROM INVESTING ACTIVITIES

A section on the cashflow statement that shows how much cash came in and went out because of various investing activities like purchasing machinery.

CASH FLOWS FROM OPERATIONS

A section on the cash-flow Stockholders’ equity statement that shows how much cash came into a company and how much went out during the normal course of business.

Cash management bill

Very short maturity bills that the Treasury occasionally sells because its cash
balances are down and it needs money for a few days.

Cash markets

Also called spot markets, these are markets that involve the immediate delivery of a security
or instrument.
Related: derivative markets.

Cash offer

A public equity issue that is sold to all interested investors.

Cash ratio

The proportion of a firm's assets held as cash.

Cash Ratio

Ratio of cash and cash equivalents to liabilities; in the case of a bank, the ratio of cash to total deposit liabilities.

Cash receipts journal

A journal used to record the transactions that result in a debit to cash.

Cash settlement contracts

Futures contracts, such as stock index futures, that settle for cash, not involving
the delivery of the underlying.

Cash-surrender value

An amount the insurance company will pay if the policyholder ends a whole life
insurance policy.

Cash Surrender Value

This is the amount available to the owner of a life insurance policy upon voluntary termination of the policy before it becomes payable by the death of the life insured. This does not apply to term insurance but only to those policies which have reduced paid up values and cash surrender values. A cash surrender in lieu of death benefit usually has tax implications.

Cash Surrender Value

Benefit that entitles a policy owner to an amount of money upon cancellation of a policy.

Cash transaction

A transaction where exchange is immediate, as contrasted to a forward contract, which
calls for future delivery of an asset at an agreed-upon price.

Cash Turnover

The number of cash cycles completed in one year.

Cash value added (CVA)

A method of investment appraisal that calculates the ratio of the net present value of an
investment to the initial capital investment.

Cashout

Refers to a situation where a firm runs out of cash and cannot readily sell marketable securities.

Circular Flow

Income payments to factors of production are spent to buy output. The receipts from these sales are used to pay factors of production, creating a circular flow of income.

Consensus forecast

The mean of all financial analysts' forecasts for a company.

Discounted cash flow

A technique that determines the present value of future cashflows by applying a rate to each periodic cash flow that is derived from the cost of
capital. Multiplying this discount by each future cash flow results in an amount that
is the present value of all the future cash flows.

Discounted Cash Flow

Techniques for establishing the relative worth of a future investment by discounting (at a required rate of return) the expected net cash flows from the project.

Discounted cash flow (DCF)

Discounted cash flow (DCF)

A method of investment appraisal that discounts future cash flows to present value using a discount rate, which is the risk-adjusted cost of capital.

discounted cash flow (DCF)

Refers to a capital investment analysis technique
that discounts, or scales down, the future cash returns from an
investment based on the cost-of-capital rate for the business. In essence,
each future return is downsized to take into account the cost of capital
from the start of the investment until the future point in time when the
return is received. Present value (PV) is the amount resulting from discounting
the future returns. Present value is subtracted from the entry
cost of the investment to determine net present value (NPV). The net
present value is positive if the present value is more than the entry cost,
which signals that the investment would earn more than the cost-ofcapital
rate. If the entry cost is more than the present value, the net
present value is negative, which means that the investment would earn
less than the business’s cost-of-capital rate.

Discretionary cash flow

cash flow that is available after the funding of all positive NPV capital investment
projects; it is available for paying cash dividends, repurchasing common stock, retiring debt, and so on.

Equivalent annual cash flow

Annuity with the same net present value as the company's proposed investment.

Expected future cash flows

Projected future cash flows associated with an asset of decision.

Flow-through basis

An account for the investment credit to show all income statement benefits of the credit
in the year of acquisition, rather than spreading them over the life of the asset acquired.

Flow-through method

The practice of reporting to shareholders using straight-line depreciation and
accelerated depreciation for tax purposes and "flowing through" the lower income taxes actually paid to the
financial statement prepared for shareholders.

Flower bond

Government bonds that are acceptable at par in payment of federal estate taxes when owned by
the decedent at the time of death.

Forecast

A revised budget estimate or update, part-way through a budget period.

Forecast

Future-oriented financial information prepared using assumptions all of which reflect the entity's planned courses of action for the period covered given management's judgment as to the most probable set of economic conditions.

free cash flow

Generally speaking, this term refers to cash flow from
profit (cash flow from operating activities, to use the more formal term).
The underlying idea is that a business is free to do what it wants with itscash flow from profit. However, a business usually has many ongoing
commitments and demands on this cash flow, so it may not actually be
free to decide what do with this source of cash. Warning: This term is
not officially defined anywhere and different persons use the term to
mean different things. Pay particular attention to how an author or
speaker is using the term.

Free Cash Flow

The funds available for distribution to the capital providers of the
company after investments inside the company have been made

Free cash flows

cash not required for operations or for reinvestment. Often defined as earnings before
interest (often obtained from operating income line on the income statement) less capital expenditures less the
change in working capital.

General cash offer

A public offering made to investors at large.

general cash offer

Sale of securities open to all investors by an already-public company.

Incremental cash flows

Difference between the firm's cash flows with and without a project.

Ledger cash

A firm's cash balance as reported in its financial statements. Also called book cash.

negative cash flow

The cash flow from the operating activities of a business
can be negative, which means that its cash balance decreased from
its sales and expense activities during the period. When a business is
operating at a loss instead of making a profit, its cash outflows for
expenses very likely may be more than its cash inflow from sales. Even
when a business makes a profit for the period, its cash inflow from sales
could be considerably less than the sales revenue recorded for the
period, thus causing a negative cash flow for the period. Caution: This
term also is used for certain types of investments in which the net cashflow from all sources and uses is negative. For example, investors in
rental real estate properties often use the term to mean that the cash
inflow from rental income is less than all cash outflows during the
period, including payments on the mortgage loan on the property.

Net Cash after Operations

cash flow available for debt service—the payment of interest and principal on loans. Generally calculated as cash provided by operating activities before interest
expense.

Net cash balance

Beginning cash balance plus cash receipts minus cash disbursements.

Nominal cash flow

A cash flow expressed in nominal terms if the actual dollars to be received or paid out are given.

Noncash charge

A cost, such as depreciation, depletion, and amortization, that does not involve any cash outflow.

NPV (net present value of cash flows)

Same as PV, but usually includes a subtraction for an initial cash outlay.

Operating cash flow

Earnings before depreciation minus taxes. It measures the cash generated from
operations, not counting capital spending or working capital requirements.

operating cash flow

See cash flow from operating activities.

Operating Cash Flow

Income available after the payment of taxes, plus the value of the
non-cash expenses

operations flow document

a document listing all operations
necessary to produce one unit of product (or perform
a specific service) and the corresponding time allowed
for each operation

Petty cash

The amount of currency and coin that a company keeps on hand to pay for small purchases and expenses.

Price-specie-flow mechanism

Adjustment mechanism under the classical gold standard whereby
disturbances in the price level in one country would be wholly or partly offset by a countervailing flow of
specie (gold coins) that would act to equalize prices across countries and automatically bring international
payments back in balance.

Process flow production

A production configuration in which products are continually
manufactured with minimal pauses or queuing.